Napocor hinders RP ability to raise funds

The inability of the National Power Corp. (Napocor) to close any of its pending deals has been hindering government's efforts to raise more funds in the international market, a top government official said.

Meeting with investors during President Arroyo's recently-concluded state visit to the US, Finance Secretary Jose Isidro Camacho said the reception for Philippine bonds had been "positive and very encouraging," but he said no deal was closed or even discussed in deference to the Napocor which is still struggling to conclude any kind of deal to finance its requirements.

"We haven't changed our strategy of letting Napocor take the first crack because we don't want to crowd it out of the market," Camacho said.

The government's borrowing tact has already generated concerns from the Bangko Sentral ng Pilipinas (BSP) which warned that the country's balance of payments (BOP) would be in deficit this year unless the government decided to change its strategyof sourcing its funds from the local market.

Monetary officials said that if Napocor is not able to raise funds in time, the government would have to go to the domestic market to borrow what it had originally planned to borrow from foreign sources. This would depress the BOP and crown out corporate borrowing which had already began to show tentative signs of activity for the first time in two to three years.

In the US, Camacho said he spent two days meeting with various investors in the US as part of a roadshow intended to drumbeat interest on the Philippines in preparatioin for its planned foreign borrowing.

"I wasn't following the market when I was in these meeting but from what I gathered from the Citigroup which arranged all these meetings, the spreads on Philippine bonds got better during the state visit," Camacho said.

According to Camacho, this had improved sentiments over the prospects of the Philippine market. During his meetings, he said investors expressed their usual concern over the government deficit and the impact of the SARS epidemic on the economy.

"Their questions were not at all surprising and it helped a great deal for us to be there and answer them directly," he said. "The more information they are given, the better for us because it corrects a lot of misimpressions."

According to Camacho, who is also chairman of the board of the Napocor, the power company has three pending deals, two of which were with the Asian Development Bank and the other with the US Overseas Private Investment Corp. (OPIC).

However, Camacho admitted that Napcoor has not been able to close the deal because of "requirements" that Napocor has not been able to meet although he did not specirfy what the company's shortcomings are.

According to a source privy to on-going preparations for foreign borrowings, the international market is "hungry" for the Philippines but they have to set back and waitfor Napocor to close a deal.

"They want us. They have been submitting various proposals, all of them very attractive and perfectly timed," the source said. "But we won't be able to do anything until Napocor is able to get something, anything."

After conducting an audit and re-evaluation of its borroing program, Napocor has already trimmed down its borrowing requirement for the year from $2 billion to only $1.2 billion.

The resulting amount, Camacho said, already included the borrowing requirement of the Power Sector Asset and Liabilities Management Corp. (PSALM) as well as the planned acquisition of some small independent power producers (IPP).

Camacho said the borrowing program also accounted for Napocor's maturing obligatioins this year although he did not disclose how much of the company's obligations would require re-financing for 2003.

Since Napocor has already raised a total of $700 million from its pre-funding activities late last year and early this year, Camacho said the power company actually only needed to raise about $200 million more for the rest of the year. Napocor has already raised about $200 million from its private placement last year. The company is expecting $250 million from the second tranche of its bond offer that was guaranteed by the OPIC and another $250 million from a loan guaranteed by the ADB.